IEEJ Webinar for the World

7 th November 2023

IEEJ Outlook 2024
－How can various pathways toward energy transition be achieved?－Yukari Niwa Yamashita
Managing Director

Institute of Energy Economics, Japan (IEEJ)ContentsPart 1 (Main Scenarios)• Global Energy Supply and Demand Outlook to 2050

Part 2 (Topics)•ASEAN ‘s Pathways towards Energy Transition•

The Important Role of LNG and Natural Gas•

Negative Emissions

Box Analysis from the Report
IEEJ © 2023

•Electrification of Automobiles and Synthetic Fuels
2What is IEEJ Outlook 2024 ?

 Quantitative outlook of energy supply and demand in the world, toward2050.
 Has two scenarios;
REF: (Reference Scenario)

ATS: (Advanced Technologies Scenario)

the prevailing changes will continue against thebackdrop of current energy and environmentalpolicies

Energy/environmental technologies areintroduced to the maximum extent possible toensure a stable supply of energy andstrengthen measures against climate changeIEEJ © 2023

Forecast analysis using econometric and other models.

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Part 1: Global Outlook
Demand will grow significantly in Asia, Middle East, and Africa
Changes in primary energy demand(2021-2050)

20

14.8

17.4

OECD

1013.8

Non-OECD02010
2020
Developing Economies
International Bunkers
ATS20302040
2050
Advanced Economies
REF

Developing Economies

Gtoe

Primary energy demand

China
India
ASEAN
Other Asia
AfricaMiddle East
Latin America
Europe/Eurasia

REF

Advanced Economies
International Bunkers-1.5 -1.0 -0.5

ATS
Gtoe

0.0

0.5

1.01.5

 (REF) Demand continues to increase with the current trend, reaching 1.2 times the current level by2050.
IEEJ © 2023

 (ATS) Global demand peaks before 2030, however, India, ASEAN, the Middle East, and Africa
will continue their demand growth.
4Part1: Global Outlook Power generation moves closer to CN.
Decarbonization of non-power is a challenge.
CO2 emissions by region

40

33.6

GtCO2

GtCO2

Energy-related CO2 emissions
33.9

30

NonPower

12.0

10
Power

IEA-APS（2023）

10
50

REF
2021

02000

IEEJ © 2023

Power25
15

14.7

NonPower

Non-Power

20

Power

20

30

2010

2020

2030

2040

2050

ATS2050

Advanced Economies

REF
2021

ATS
2050

Developing Economies （REF）CO2 emissions are nearly flat as increased demand is offset by lower CO2 intensity.
 （ATS）The emission peaks out before 2030 and decline to 14.7 GtCO2 in 2050 (56% below 2021).
It is still far from carbon neutrality, and decarbonization in the non-power sector and emerging anddeveloping countries are significant challenges.
＊IEA-APS: Announced Pledges Scenario from IEA “World Energy Outlook 2023”

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Part 1: Global Outlook Power generation will be 1.7 to 2 times.
Among them, renewable increase significantly.
Share in Power GenerationPWh

Power Generation
60

Advanced Economies
Developing Economies

4020

57.5

100%

49.1
50%

28.4
15.40%

REF
20210REF2000

2021

2050

REF
2021

Advanced Economies

ATS2050

ATS

ATS
2050

Developing Economies

FossilThermal(w/CCS, H2)

Variable Renewables

Other Renewables

NuclearIEEJ © 2023

 (REF) Power generation increases 1.7 times from current levels. Most of the increase is indeveloping countries, but also in developed countries as electrification progresses.
 (ATS) Power generation doubles the current level. In addition to electrification progress, demand
for green hydrogen is boosting demand. About 85% of power sources are decarbonized.
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Part 1: Global Outlook Renewable energy capacity will more thandouble by 2030 and continue the expansion.
 Remarkable penetration of renewablescontinues. The installed capacity of renewableenergy in 2030 is expected to be 2.0~2.4 times
that of 2021.
 Increases will continue after 2030 under bothscenarios;

Renewable capacity［GW］
PV(ATS) Renewable energy installation accelerates, 5,000
increasing capacity to 5.4 times the current level.

IEEJ © 2023

Hydro

Other Ren.
18,39720,00013,917

 (REF) The expansion will slightly slow down due 15,000
to higher system costs and a decrease in suitable
10,000locations.

Particularly, solar PV and wind will be nearly 10times the current capacity. Both daily andseasonal storage will be essential for a stable
power supply.

Wind0

10,855
7,406
1,639

13,591

8,399

3,464

2010 2021 2030 2040 2050 2030 2040 2050
Reference

Advanced7

Part 1: Global Outlook While electrification and hydrogenation proceed
rapidly, the role of fossil fuels remains
Final Energy Demands（ATS）

Industry*Gas

2021

TransportOil

2021

Services

Household/CoalBiomass

2050

Fossil Fuel2050

Hydrogen**Ele./Heat

Fossil Fuel2021

Fossil Fuel2050

 Industry
Fossil fuels remain due to the difficulty ofsubstitution in heat demand at highertemperatures. (especially for steel and cement).
 Transport
ZEVs (EVs + H2 FCVs) are largely penetrating in
the automobile subsector. They account for 60%of the passenger cars fleet and 47% of the trucks
and buses.

Ele./HeatEle.
Heat

Ele./Heat

Ele./Heat0IEEJ © 2023

Elec/Heat

2*Industry includes transformation process in blast furnaces.
**Hydrogen includes ammonia and synthetic fuel from H2.

Gtoe4

 Others (Household and Services)Significant electrification of both service
subsectors and homes (often substituting fromtraditional biomass).
8Primary oil and gas supply increases in Reference,and decreases in Advanced Tech..
Primary Supply（Fossil Fuel）

2020

Gtoe

Gtoe

Primary Supply
14.8
14.8

15

15
10073%

50

6,000

Oil

Natural gas(Reference)(Advanced)

4,000

73%

53%

53%

ﾚﾌｧﾚﾝｽ
REF
ATS
Reference 技術進展
Advanced
2000
2000

⽯炭
Coal

Coal

IEEJ © 2023

13.813.8

Coal

10.0
10.0

105Mtoe

17.4
17.4

⽯油
Oil

Oil

2021
2021
天然ガス
NaturalGas

Gas

2050
2050
原⼦⼒
NuclearNuclear

再エネ

Renewable
Renewable

2,00001990

2000

2010

2020

2030

2040

2050

 (REF) Primary supply in 2050 increases 1.2 times that of 2021, 73% of which will be fossil fuels. Oil
demand increases 1.2 times and gas 1.3 times, while coal decreases 0.8 times.
 (ATS) Half of the primary supply is fossil fuels, and the other half is renewable and nuclear.
Oil and coal supply peaks in the 2020s because of a decrease in transportation demand for oil andpower generation demand for coal. Gas supplies remains flat until the 2030s and begin to decline
before 2040.
9Part 1: Global OutlookConclusion
 India, ASEAN, Middle East, and Africa will be the center of demand growth in bothscenarios.
 Emissions in the Reference scenario remains flat, and those from the Advanced
Technologies scenario are halfway from reaching carbon neutrality. The remaining
emissions are mainly from the non-power sector and the developing countries. To
further cut emissions will remain a difficult challenge.

IEEJ © 2023

 Power generation doubles in the next three decades due to factors such as economic
growth, electrification, and demand for green hydrogen. As variable renewable covers alarge part of electricity, storage and dispatchable power are key to a stable electricitysupply.
 In 2050, fossil fuels account for 73% of primary supply in Reference scenario and 53%
in Advanced Technologies scenario. The effort for a stable supply of fossil fuels must becontinued.
10IEEJ © 2023

Topic: To Achieve the Important Role of LNG andNatural Gas

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The rapid rise in prices resulted in a more significant expansion ofthe LNG market in terms of the total amount than the volumeIEEJ © 20233002502001504035

US$/million
BTU⽶ドル/ 100万Btu

350

LNG市場規模:
⾦額・数量
LNG Market
Size :Value& Volumebillion 10億⽶ドル・100万トン
US$ - million tons

 The LNG market
experienced a steady
growth in the volume
wise in 2022
 The paid amountdoubled in 2022, in astark contrast against2020 when theamount decreased
significantly
 The economic valueof the market is
expected to shrink
in 2023 due to lower
LNG prices

40030252015100

1050

5002019

2020

2021

Global LNG Import billion US$
世界LNG輸⼊10億⽶ドル

Global LNG Import million tons
世界LNG輸⼊100万トン

Japan LNG Import
⽇本LNG平均単価average unit cost

TTF average
TTF平均2022
Global LNG average unit cost
世界LNG平均単価

Source:Estimated Global
using GIIGNL,Global
Trade
Atlas, Statistics,
Trade Statistics,
and ICE data
出所:
GIIGNL,
Trade
Atlas,
Trade
ICEデータに基づき作成

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Investment is needed to meet incremental LNG demand,
as well as replace depleting existing LNG production capacity

IEEJ © 2023

 Investment is needed in 8 - 18
mtpa LNG production capacity
per year until 2050
 Required additional capacity
investment means the gap
between projected LNG demandand decreasing existingproduction capacity, to be filledby the followings:
1.

Greenfield project investment

2.

Alternative new field development(backfill) investment(the yellow stack indicates alreadysanctioned projects)

unit: million tonnes
per year700
600

New projects (with FIDs)
Existing capacity (reflecting depletion and degradation)
LNG demand (REF)
LNG demand (ATS)REF: 18 mtpa LNG
production capacity peryear until 2050

500
400

ATS: >8 mtpa LNG
production capacity
per year until 2050

300

3.

Investment in existing fields to offset
production decline

200

4.

Rejuvenation of existing liquefaction
facilities100 *Those projects alreadygreenlighted (included in the yellowstacks) may entails uncertainty withpossible delays and failures tomaterialise

LNG Supply: capacity requiring investment

‐
2022

2030

2040

2050
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Challenges to Long-Term Stabilization and Development of theLNG Market
Supply side

Points of focus and issues to be addressed from LNG-consuming countries
Steady realization of the U.S. LNG project (will be the future source of supply).
Expansion and maintenance of LNG projects from Australia, Canada, Mexico, etc.
Realization of LNG projects in frontier regions of Africa
Utilization of amortized LNG projects to contribute to market flexibility

Demand side As the focus of demand growth shifts to developing countries, support from leading
LNG consuming countries is important
While the pursuit of flexibility in the LNG market is emphasized, it is necessary for thepublic and private sectors to formulate ways to secure stable demand and enablelong-term commitments. Demand aggregation, portfolio player utilization, and joint
procurement are required.
Pricing
EnvironmentIEEJ © 2023

Financial

The challenge is to find the right combination between crude oil linkage and theexpanding gas hub price method linkage.
Clarification of LNG project standards that are compatible with the energy transition todecarbonization.
Promotion of CC(U)S/Power Greening in LNG Liquefaction (LNG Greening)
Need a financing method to meet shorter contracts.
As the market expands, it is important to support the creditworthiness of new buyers.
14Electrification of automobiles andSynthetic Fuels (e-fuels)*Note: The following abbreviations are used in this presentation:ICEV: Internal Combustion Engine Vehicles
EV : Plug-in Hybrid Electric Vehicles (PHEVs) and Battery Electric Vehicles (BEVs)

IEEJ © 2023

WtW:Well to Wheel(1) Well to Tank (2) Tank to Wheel

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GHG emissions from EVs are lower than those of ICEVs,
but bigger batteries require more critical minerals
 EVs accounted for 14% of global vehicle sales in 2022, up from 9% in 2021 and less than 5% in 2020
 Well-to-Wheel, GHG emissions are lower for EVs than for ICEVs. As the average power generation mix(coal is included) becomes more decarbonized, emissions from EVs become even smaller.
 However, EVs are equipped with a high-capacity batteries that require more critical minerals, such as
nickel and graphite, as raw materials. BEVs require about three times more critical minerals than PHEVs.
Critical minerals required

GHG emissions per kilometer (WtW basis)
140

120
100

100

80

80kg/cargCO2-eq/km

120

60

40

40

20

2000ICEV
Well to Tank

IEEJ © 2023

60PHEV
Tank to Wheel

BEV

ICEV
Coppergraphite
palladium

lithium
dysprosiumrhodium

PHEVnickelneodymium

BEV
cobaltplatinum16

PHEVs not only require less critical minerals than BEVs, but canfurther reduce GHG emissions by using e-fuels Our analysis assumes that PHEVs run in EV mode until the battery becomes low, and then theengine (ICE) kicks in to drive the vehicle. Because there is an ICE, the batteries can be smaller
than those in BEVs, therefore using about 2/3 less critical minerals as raw materials.
 If the components of e-fuels are CO2 directly captured from the atmosphere (DACs) and H2produced from renewable electricity, the net emissions during e-fuel production (well to tank) will benegative. Those negative emissions will be offset during combustion (tank to wheel). PHEVs (andICEVs) may have a relative advantage to BEVs in terms of environmental characteristics.

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WtW GHG emissions from the use of e-fuels

N.B.:Renewable electiricity is used for e-fuels while global average electricity is used for EV batteroes.

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The high cost of e-fuels is an issue. If prices fall, owning ICEVs may
become similar in price and less emitting than BEVs.
 The cost of e-fuels is still very high being still at the development stage. The current price is estimatedat $5/L, assuming the current costs for green hydrogen, DACs and production costs. At $5/L, the total
annual cost of BEVs (ownership and fuel/electricity) is lower.
 If the price of e-fuels was to fall to about $2/L, due to mass production and other factors, the cost of
conventional vehicles (ICEVs) would be comparable to EVs
Estimation of annual costs for the use of passenger cars
If the synthetic fuel price is 2$/L

4,000

4,000

3,000

3,000$/year$/year

If the price of synthetic fuel is 5$/L

2,000

1,000

1,000

00
ICEV

IEEJ © 2023

2,000Vehicle cost

PHEV
e-fuel/electiricty cost

BEV

ICEV
Vehicle cost

PHEV

BEV

e-fuel/electiricty cost18

BTW: PHEV users with short driving range, even the current priceof $5/L can compete with BEVs
 The PHEVs that are in the EV mode 90% of the time, there is no need for large batteries. Even withthe current $5/L, the total cost would be about the same as that of a BEV.
Estimated annual cost of using a passenger car (assuming low driving range)
If the synthetic fuel price is 2$/L

4,000

4,000

3,000

3,000$/年$/year

If the price of synthetic fuel is 5$/L

2,000

1,000

1,000

00
ICEV

IEEJ © 2023

2,000

Vehicle cost

PHEV
e-fuel/electiricty cost

BEV

ICEV
Vehicle cost

PHEV

BEV

e-fuel/electiricty cost

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THANK YOU FOR YOUR ATTENTIONIEEJ © 2023

Please visit IEEJ website for our analyses: https://eneken.ieej.or.jp/en/IEEJ Outlook 2024 will become available shortly at the above website.
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contact: report@tky.ieej.or.jp